Question 1
Dalrymple Company produces a special spray nozzle. The budgeted indirect total cost of inserting the spray nozzle is $68,750. The budgeted number of nozzles to be inserted is 11,000. What is the budgeted indirect cost allocation rate for this activity?
◦ $0.16
◦ $0.32
◦ $1.16
◦ $6.25
Question 2
Extracts from cost information of Hebar Corp.:
| | Simple L3 Pack | Complex L7 Pack | Total
|
| Setup cost allocated using direct labor-hours | $19,250 | $5,750 | $25,000 |
| Setup cost allocated using setup-hours | $13,400 | $11,600 | $25,000 |
Assuming that setup-hours is considered a more effective cost drive for allocating setup costs than direct labor-hours. Which of the following statements is true of Hebar's setup costs under traditional costing?
◦ L3 pack is undercosted by $5,850
◦ L7 pack is undercosted by $5,750
◦ L3 pack is overcosted by $5,850
◦ L7 pack is overcosted by $5,850
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